Cloud Computing Has Potential, But How Much?
March 28, 2012
Cloud computing was the fastest-growing category of infrastructure spending in 2011, with a 28.4 percent increase, according to the Telecommunications Industry Association. The TIA also expects cloud computing will continue to be the fastest-growing category of network and facilities investment during the next four years, averaging 20.3 percent compounded annually.
As new cloud-based end-user services emerge and as existing services expand, end user spending will more than double to $12.1 billion in 2015 from $5.8 billion in 2011, according to the TIA. But some reasonable caution always is in order when looking at cloud computing revenue. For starters, there are multiple types of revenue, not all likely to be earned directly by service providers…
Or should revenues be more narrowly defined to focus on the rental of computing cycles, storage and ancillary services, rather than the value of the software sold to users? Also, should servers used to support cloud computing be considered?
As with many other potential revenue streams, it is possible to overstate the revenue impact for telecom service providers. Keep in mind that cloud computing also is likely to reduce some existing telecom revenue streams, making its net revenue contribution more speculative.
In the telecom space, the analysts expect key winners to include Rackspace, Equinix and competitive local exchange carriers and metro bandwidth suppliers.
Also, public cloud computing is likely to reduce traditional telco enterprise service revenues in the access services segment. The point is that assessing cloud computing revenue contributions for various ecosystem participants is complicated.
How much overlap there is between hosting and cloud computing services is an important issue for service providers. At one level, hosting is about server real estate and amenities. But cloud computing is about some other things, namely rental of computing cycles and storage, rental of operating systems and platforms, and rental of actual business apps.
Though service providers have embraced the hosting business and content delivery networks as “valued added parts of the transport and business,” it remains unclear how far they might ultimately go – or be able to go – in the core cloud computing business.
Once business and consumer software becomes a simple app downloaded directly to a mobile phone, the issue is what revenue reasonably could be earned by any intermediaries in the value chain. To be sure, not all business software will be that simple to sell and support.
But that also means successful cloud software suppliers will have to master what we used to call the packaged software business. Historically, telco and cable personnel haven’t been notably good at that.
Prospects for telcos and cable companies arguably are better in the “hosting” part of the business. But the real revenue upside is probably elsewhere, in the “apps” part of the business.